Section 74 cannot be invoked in absence of explicit findings of fraud or suppression, even if the assessee failed to respond to the show cause notice.- Says Madras High Court
Date & Year of Judgment
08 October 2025
This ruling reinforces that Section 74 cannot be invoked in absence of explicit findings of fraud or suppression, even if the assessee failed to respond to the show cause notice.
Case Reference
Paul Rajan Punithan vs. Assistant Commissioner (ST) & Anr.W.P.(MD) No. 23865 of 2025
Before the Madras High Court (Madurai Bench)
1. Main Issue Involved
Whether reassessment under Section 74 of the TNGST Act is valid when:
The extended limitation is invoked,
But the show cause notice and final order do not demonstrate fraud, wilful misstatement, or suppression of facts.
The Court examined whether non-response to SCN can substitute statutory requirement of proving fraud under Section 74.
2. Sections and Rules Discussed
Section 74(1) and 74(9), TNGST Act
Section 11A of Central Excise Act (pari materia principle)
CBIC Circular dated 13.12.2023
Supreme Court decisions:
CCE v. H.M.M. Ltd.
CCE v. Pepsi Foods Ltd.
Madras High Court ruling in S.S. Communications
The Court aligned GST extended limitation principles with long-settled excise jurisprudence on strict construction.
3. Facts of the Case
Assessment Year: 2020–21
Show cause notice dated 28.03.2025 issued under Section 74.
Petitioner did not respond to SCN.
Order dated 03.06.2025 passed demanding ₹4,00,377/- with penalty and interest.
Writ petition filed challenging invocation of Section 74.
The record revealed no allegation of fraud, suppression or wilful misstatement in SCN or order.
The defect was substantive — absence of jurisdictional ingredients — not procedural non-compliance by the assessee.
4. Petitioner’s Submissions
Section 74 permits extended limitation only when fraud/suppression exists.
Neither SCN nor order demonstrates such elements.
Extended limitation wrongly invoked.
Relied on earlier Madurai Bench decision in S.S. Communications.
Cited CBIC Circular dated 13.12.2023 clarifying that Section 74 cannot be invoked merely for non-payment. It is actually an instruction number 05/2023-GST issued by CBIC
The petitioner’s case rested on strict statutory construction rather than factual rebuttal.
5. Department’s Submissions
Petitioner should be relegated to appellate remedy.
Non-response to SCN justifies confirmation of demand.
However, when questioned, the department could not point to any finding of fraud or suppression in the impugned order.
The department’s reliance on alternate remedy failed because jurisdictional defect overrides procedural remedy doctrine.
6. Analysis and Findings of the Court
The Court held:
Section 74 permits reassessment within five years only if fraud, wilful misstatement, or suppression exists.
These elements constitute a jurisdictional fact.
Absence of such finding vitiates entire proceedings.
Extended limitation must be strictly construed.
Circular dated 13.12.2023 (instruction number 05/2023-GST issued by CBIC) clearly states Section 74 cannot be invoked merely for non-payment.
Mere failure to reply to SCN does not cure jurisdictional defect.
The Court emphasized that existence of jurisdictional fact is sine qua non for exercise of power.
The Court reaffirmed that statutory preconditions cannot be inferred or presumed — they must be explicitly demonstrated.
7. Final Judgment / Operative Directions
Impugned order dated 03.06.2025 quashed.
Section 74 proceedings set aside.
Writ Petition allowed.
No costs.
The Court granted complete relief without remand, underscoring absence of power rather than procedural lapse.
8. Similar / Related Judgments & Counter Judgments
Supporting Line of Authority
S.S. Communications (Madras HC – Madurai Bench)
Neeyamo Enterprise Solutions Pvt. Ltd. (Madras HC – 11.11.2025)
Safecon Lifescience Pvt. Ltd. (Allahabad HC)
Supreme Court in Reliance Industries Ltd. (intent necessary for suppression)
Divergent Approach
Isolated single-judge decisions suggesting conduct may imply suppression — not followed in this case.
The Madurai Bench has consistently required strict compliance with fraud requirement before permitting Section 74 invocation.
9. CA BTA Insights (Professional Takeaway)
This judgment is extremely useful in defending:
Section 74 notices issued mechanically.
Cases where extended limitation invoked without fraud finding.
Situations where assessee did not reply to SCN but jurisdictional defect exists.
Matters where department seeks to rely on presumption rather than explicit allegation.
Strategic drafting points:
Scrutinize SCN for explicit fraud allegation.
Cite instruction number 05/2023-GST issued by CBIC
Emphasize “jurisdictional fact” doctrine.
Argue that writ is maintainable where power itself is lacking.
The ruling confirms that extended limitation under GST is an exception, not a routine mechanism, and must be supported by clear fraud findings. Copy of the judgment is attached